In this article, we’ll delve deeper into what it takes to develop a monetized, flexible, and efficient fintech strategy across various product categories. We’ll cover common pitfalls, favorable traits, and most importantly, what “best-of-breed” looks like from a fintech perspective.

Most of the Vertical SaaS landscape has recognized the significant opportunity within fintech, not just in terms of monetization, but also in increasing customer value and impacting valuation multiples by 2-5x (source: a16z).

Companies like Toast, ServiceTitan, and MindBody have demonstrated that fintech can be the driving force behind a platform's success in its vertical. However, they encountered their fair share of challenges along the way.

Today, vertical SaaS platforms benefit from a somewhat established path. With modern processors developing solutions for specific use cases, lending and insurance brokers adopting a more tech-forward approach, and banks supporting platforms offering banking as a service.

Despite these advantages, many questions remain unanswered

• Who is the right processor for my vertical?

• How can I optimize monetization on payments?

• How do I manage risk as a platform?

• How can I identify other fintech products my customers will find valuable?

• What monetization opportunities exist beyond payments?

  
  

The reality is, no one can definitively answer these questions and maintain the same answer at the end of a 3-year exclusive contract. The fintech landscape is fluid, emphasizing the importance of maintaining optionality and flexibility. This begins with payments and the associated data:

Payments

There are multiple ways for a vertical SaaS platform to facilitate payments for their customers. We typically see them fall into a few different categories:

• Referral (not monetized)

  • Processor fully owns merchant and merchant data

• "Payfac as a service"

  • White labeled with a single Payfac as a service

  • White labeled with multiple Payfacs (feature dependent)

    • International considerations

    • Tender type support (excluding for this discussion B2B2C / BNPL use cases)

    • Capabilities (ex. Card Present + Card Not Present support)

• Internal Payfac (Fully Registered Payment Facilitator)

Each option comes with its benefits and potential pitfalls. The right choice here enables platforms to make fintech decisions to suit their vertical. While the possibilities for vertical considerations and features are vast, we’ll focus on what is necessary to diversify fintech revenue beyond payments.

Merchant data

Merchant data, often overlooked due to compliance implications, is crucial for underwriting purposes across other fintech products. Platforms should ensure they have access to this data.

Non-exclusivity

The payments landscape is rapidly evolving, with multiple players constantly updating their offerings. Exclusive agreements limit potential and may pose risks in the event of an outage or account shutdown.

Pricing control

Maintaining control over pricing allows platforms to recognize processing fees as top-line revenue and compete for customers in new ways.

Lending, Insurance, BaaS

These categories can be condensed into one decision for each platform: which products are contextual to their customers. To make this decision, platforms should consider which financial products their customers are using or could benefit from. For example, a platform for residential construction companies might embed a consumer lending solution. A platform for SMB service businesses might find it helpful to embed certain business insurance policies. 

Important considerations for these fintech products include:

Truly Embedded

Seamless integration within the platform improves adoption and ease of use. Access to merchant data is crucial for this process.

Contextual

Offering lending or insurance products at the right time is essential for their effectiveness. Platforms should ensure offers are targeted and align with users' current actions.

Tech Enabled

Partnering with banks and brokers for launching fintech products requires robust infrastructure. The platform should leverage merchant data to simplify the underwriting process.

As fintech evolves rapidly, from compliance to pricing models, flexibility becomes increasingly important. Connecting to best-of-breed tools swiftly, while maintaining optionality, is crucial for maximizing fintech revenue—a strategy adopted by the most successful fintech Vertical SaaS platforms.

At Preczn, we enable this approach with a vendor-neutral stance and pre-built integrations into leading fintech point solutions across payments, lending, treasury, and insurance.

We recently established a new integration with Finix. If you’re interested in exploring options for your future fintech monetization, reach out to our team!